When do freelancers in Germany need to register for Umsatzsteuer (VAT)?

Umsatzsteuer (USt) is Germany's value-added tax, equivalent to VAT. The standard rate is 19%, with a reduced rate of 7% for specified goods and services (food, books, transport). If your business turnover was under €22,000 in the previous calendar year and is expected to remain under €50,000 in the current year, you can use the Kleinunternehmerregelung (small business rule) and be exempt from charging and remitting Umsatzsteuer.

As a Kleinunternehmer, you do not charge VAT on your invoices and cannot reclaim input VAT on your business purchases. You simply state on your invoices that VAT is not charged per §19 UStG. This simplifies administration significantly. If you expect to exceed the thresholds, you must register for Umsatzsteuer and charge it on all invoices from that point.

You can also voluntarily register for Umsatzsteuer even below the threshold, which is useful if your clients are mostly businesses (who can reclaim the VAT you charge them) and if you have significant business purchases where you want to recover input VAT. Once registered, you file periodic Umsatzsteuervoranmeldungen (advance VAT returns) monthly or quarterly, and an annual Umsatzsteuererklärung. The Finanzamt sets your reporting frequency based on your tax liability.